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Prism Could Be a Watershed Moment for Online Privacy Legislation

Or, It Could Take the Focus Off Advertising Entirely

Privacy legislation has been brewing in congress for years now, but a combination of public apathy and strong industry opposition has kept it at bay. Could the Prism data surveillance scandal become the watershed moment that propels it forward?

It's too soon to tell how revelations that the U.S. government has been mining web communications and phone logs will impact public opinion, but none of what the government has been implicated in doing would be possible if corporations weren't mining and storing consumer data, often for advertising purposes.

Senator Jay Rockefeller

"The privacy legislation has been a bit on the back burner, and I think this may help focus more attention on it and perhaps put it back on the front burner," said Linda Goldstein, a partner and chair of the advertising, marketing and media division at Manatt, Phelps and Phillips. "This could have a significant impact on consumer attitudes which ultimately could impact consumers' willingness to share information with brands."

Following a Guardian report revealing that Verizon shared call records on a daily basis with the National Security Administration, several of the largest digital media and advertising firms including Google, Facebook, AOL, Apple, Microsoft and Yahoo were implicated in reports suggesting they provided consumer interaction data to the NSA and Federal Bureau of Investigation; the firms denied they've been pumping data to the government as part of the alleged program.

If the general public connects the dots between corporate data collection and government access to that data, it could spur stricter laws for advertisers. "I think it may put more pressure on the ad industry in terms of this whole behavioral targeting issue," said Thomas Smedinghoff, a partner at Edwards Wildman Palmer who specializes in privacy and information security law. "I certainly don't think it's going to help the ad industry."

Focus on advertising?
Of course, many in the ad industry hope this government data-gate serves as a foil to commercial data practices, resulting in less focus on how marketers gather and use consumer information. "Politically, the current debate around the Prism program and other government practices certainly takes the focus off of more accepted commercial data practices, and it would seem antithetical to the administration's current national security practices for them to push data collection restrictions onto leading internet companies," said Mike Zaneis, SVP and general counsel of the digital ad industry's largest trade group, the Interactive Advertising Bureau.

But the reason government has access to so much data in the first place, in many cases, is because corporations collect it. "A lot of what the government knows about us they know because of companies, so you have to have some confidence that you have some control over the data they collect on you," said Justin Brookman, director of the Project on Consumer Privacy for the Center for Democracy and Technology. Mr. Brookman argued that controls for how corporations collect, transfer and store data are necessary because "it's hard to fix government access."

Senator Jay Rockefeller, a Democrat, re-submitted his Do-Not-Track Online Act (originally proposed in 2011) in February. The bill calls on the Federal Trade Commission to oversee development of a DNT mechanism, and was co-sponsored by Connecticut Democratic Senator Richard Blumenthal. The Prism scandal could thrust the bill into the spotlight, or prompt additional legislation.

"It certainly tees it up," said Anthony DiResta, a partner at law firm Winston and Strawn who focuses on advertising and privacy issues. "It really presents a clash of two very important concepts: one being the governmental interest in exploring leads that could impact national security, yet on the other hand this very important notion we have in privacy of the right to be left alone."

Reports of the NSA program fueled a firestorm among people concerned about excessive government surveillance and corporate cooperation, as well as speculation regarding fallout for the firms involved in the form of future consumer exodus. If the uproar persists and spreads among everyday consumers, it could push privacy legislation towards the top of the pile.

Heightening awareness
"I think it's going to heighten consumer awareness of the magnitude of data that can be collected," said Ms. Goldstein. "And that could, I think, give some impetus to additional privacy legislation."

Organizations including the ACLU have launched petitions to protest the NSA's surveillance program, however there doesn't appear to be any widespread activist movement bubbling yet. Indeed, rather than spawning a big push for comprehensive privacy legislation, the scandal could be perceived more as a political problem for the Obama administration if some lawmakers have their way. Senator Rand Paul, a Republican from Kentucky, aims to challenge the Prism program at the Supreme Court level. Some Democrats have also expressed disapproval.

"When Americans call their friends and family, whom they call, when they call, and where they call from is private information. We believe the large-scale collection of this information by the government has a very significant impact on Americans' privacy, whether senior government officials recognize that fact or not," said Democratic Senators Mark Udall of Colorado and Ron Wyden of Oregon in a joint statement last week.

"I think it's already becoming politicized as yet another Obama administration issue and some of the attention may be diverted to that…and that may take some of the attention away from the core privacy issues," said Ms. Goldstein.